Le TRIN:
TRIN - SHORT-TERM TRADING INDEX
A. Definition
The Short-Term Trading Index, or TRIN, compares the ratio of the number of
up/down issues with the ratio of up/down volume to measure the strength or
weakness of the market. TRIN is used on an intra-day basis and is available from
Quotron with the symbol TRIN. The formula is:
TRIN = (No. Up Issues/No. Down Issues)/ (Up Volume/Down Volume)
B. Trading Uses
TRIN gauges the rate at which volume is flowing into the market relative to
the ratio of advancing/declining number of issues. TRIN is based on the assumption
that the direction and rate of volume is a leading indicator for the stock market. The
data for TRIN is useful only for the current trading day and has no cumulative effect
like the A/D Line.
TRIN of 1 is neutral
A TRIN of 1 is considered neutral because it means that the up/down volume
and the up/down number of issues are both moving in the same direction in equal
proportions. For example, the following three situations all give a neutral TRIN of
1:
Bull Market: TRIN = (1500/500)/(150m/50m) = 3/3 = 1
Neutral Market: TRIN = (1000/1000)/(100m/100m) = 1/1 = 1
Bear Market: TRIN = (500/1500)/(50m/150m) = (1/3)/(1/3) =1
TRIN below 1 is bullish
In a bull market, a TRIN value below 1 is considered bullish because
up-volume is unexpectedly high (i.e., up-volume is large relative to the ratio of
up/down number of issues). In other words, a relatively large amount of volume is
flowing into a limited number of advancing issues, suggesting that further volume is
likely to flow into advancing issues. If TRIN is declining in a rising market, a bullish
signal is given because it suggests that an increasing amount of volume is flowing
into a limited number of advancing issues. For example:
Bull Market: TRIN = (1500/500)/(175m/25m) = 3/7 = .43
In a bear market, a TRIN value below 1 is also considered bullish because an
unexpectedly low amount of volume is flowing into declining issues (i.e., down-volume
is small relative to the ratio of up/down number of issues). If TRIN is declining in
a bear market, a bullish signal is given because it shows that volume flowing into
declining issues is drying up. For example:
Bear Market: TRIN = (500/1500)/(100m/100m) = (1/3)/1 = .33
TRIN above 1 is bearish
In a bull market, a TRIN value above 1 is considered bearish because an
unexpectedly small amount of volume is flowing into advancing issues (i.e., up volume
is relatively small compared to the ratio of up/down number of issues). If TRIN is
rising in a bull market, a bearish signal is given because volume into advancing
issues is drying up. For example:
Bull Market: TRIN = (1500/500)/(100m/100m) = 3/1 = 3
In a bear market, a TRIN value above 1 is also considered bearish because an
unexpectedly large amount of volume is flowing into declining issues (i.e., down
volume is relatively high compared to the ratio of up/down number of issues). If
TRIN is rising in a bear market, a bearish signal is given because it shows that
volume is increasing into a limited number of declining issues. For example:
Bear Market: TRIN = (500/1500)/(25m/175m) = .33/.14 = 2.4
The various values and significance of TRIN can be summarized as follows:
Rising Market Declining Market
Bullish - High volume Bullish - Low volume
TRIN below 1 flowing into a limited flowing into down issues
(Bullish) number of up issues
Bearish - Low volume Bearish - High volume
TRIN above 1 flowing into up issues flowing into a limited
(Bearish) number of down issues
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